Road projects worth Rs 50,000 crore to be offered under PPP in FY17

This year the government expects to garner more than Rs 20,000 crore by way of private investments in the roads sector. It has already awarded projects worth Rs 12,000 croreRajat Arora | ET Bureau | December 28, 2015, 07:42 IST

NEW DELHI: The road transport and highways ministry has lined up projects worth Rs 50,000 crore to be awarded under public-private partnership mode in 2016-17. This will be the largest chunk of highways projects to be awarded by the ministry under the PPP mode in a single financial year. The ministry plans to award close to 5,000 km to private companies during the next fiscal, officials said. As part of this plan, the ministry will invite bids for its religious tourism circuit programme including Char Dham connectivity and the Bharat Mala project, which envisages development of roads along the international borders and coastal areas.

This year the government expects to garner more than Rs 20,000 crore by way of private investments in the roads sector. It has already awarded projects worth Rs 12,000 crore. "Projects will be awarded mostly under the hybrid annuity model. Some of them will also be given out on the build-operate-transfer (BOT) model. We are looking at awarding close to 5,000 km to private players," a senior government official said.

The government is targeting increasing the length of highways across the country to 1.5 lakh km from the existing 1 lakh km in the next four years. It plans to undertake construction of 7,000-8000 km on its own during the next fiscal. To boost private sector interest in the sector, the ministry has taken a slew of measures including introducing an exit policy aimed at improving the availability of equity funds by allowing developers to monetise existing projects. The exit policy framework permits concessionaires to divest 100% equity and exit all operational BOT projects two years after completion of construction.

The government has also authorised the National Highways Authority of India to intervene in projects that are in the advanced stage of completion but are stuck due to lack of funds. It has authorised the authority to provide funds to such projects from within its corpus on a loan basis at a predetermined rate of return. The ministry is now promoting the hybrid annuity model, a new mode of delivery under PPP, for awarding road projects under which 40% of project cost is provided by the government to the concessionaire.

The remaining 60% is to be arranged in form of debt and equity to be compensated over 15 years as bi-annual annuities.

There is a separate provision for operation and management payments by the government to the concessionaire. The private party does not have to bear the traffic risk. All the payments have been inflation indexed through a price multiple index.